The Motley Fool highlights Illinois Tool Works and Waste Management for dividend growth: ITW yields 2.4% and has raised payouts for 57 years; WM’s 14.5% hike last December marked 23 consecutive years of increases.
The article says the industrial index yielded nearly 1.2%, versus just under 1.1% for the S&P 500, while 10-year Treasury yields hovered around 5%. Its case for the sector is payout growth rather than high current income. Industrial stocks made up 21.6% of the S&P 500 Dividend Aristocrats Index, whose members had raised dividends for at least 25 consecutive years.
Illinois Tool Works reported operating-margin gains of 40 basis points in the second quarter and 50 basis points year to date through the first half, despite material-inflation and employee-cost pressures. Its dividend grew at a 7.1% annualized rate over five years, and its free-cash-flow yield was 3.6%. Waste Management’s landfill-gas-to-renewable-natural-gas business could become a significant earnings contributor as soon as next year; the article also cites improved free-cash-flow conversion and share repurchases as supports for its dividend growth.
